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eToroThe Complete Guide to After-Hours Trading
Written by Brian Nibley
Fact-checked by Steven Hatzakis
Edited by Jeff Anberg
After-hours trading unlocks potential opportunities by allowing stocks, options, and ETFs to change hands beyond the regular 9:30 a.m. to 4:00 p.m. trading window of the NYSE and NASDAQ exchanges. This window of lower-liquidity trading that occurs after exchanges close for the day, known collectively as extended-hours trading, has grown increasingly popular in recent years.
Whether you're looking to capitalize on an earnings report or global news events, understanding the ins and outs of after-hours trading is crucial. In this guide, I'll walk you through the essentials of trading after the closing bell, showing you how to navigate its unique risks while seizing its potential rewards.
What is after-hours trading?
After-hours trading involves market trading that occurs after the regular trading day, which ends at 4:00 p.m. Eastern Time (ET) in the U.S. There is also an early bird trading session known as “pre-market trading” that begins before the 9:30 a.m. ET markets open. These two sessions together make up after-hours trading, also known as extended-hours trading.
After-hours trading has different rules in place than the regular trading day. In addition, each brokerage firm may have its own set of rules regarding what types of trades can be placed during the after-hours session. To illustrate this, here are the extended-hours trading rules for Fidelity’s platform:
- Traders can only place the following types of orders: buy, buy to cover, sell, or short-sale orders.
- All orders must be limit orders.
- Pre-market trading orders can only be entered and executed between 7:00 a.m. and 9:28 a.m. ET, and short sale orders are available only from 8:00 a.m. to 9:28 a.m. ET.
- Orders in the after-hours session can be entered and executed between 4:00 p.m. and 8:00 p.m. ET.
These special rules are introduced due to the relative lack of volume during this time. If an order cannot be filled, it will typically be canceled or held until regular trading hours.
Why trade after-hours?
The main benefit of after-hours trading is that it allows trades to be placed outside of the traditional market time window. Sometimes, this lets investors make more favorable and informed trades, such as when a news event occurs outside of normal trading hours.
Many companies release their earnings just after 4:00 p.m. ET, for example. Using after-hours trading gives investors the ability to open and manage a position right after the news instead of waiting until the market opens the following day. Or, when it comes to pre-market hours, traders might want to manage positions based on news that arrives before the market opens, like the monthly U.S. employment report, released at 8:30 a.m. ET on the first Friday of every month.
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After-hours trading schedule
Each broker sets the exact times that extended-hours trades can be placed, but generally, the time frames are as follows.
Pre-market trading usually happens between 8:00 a.m. and 9:30 a.m. ET on weekdays. However, some discount brokers provide access to NYSE and NASDAQ pre-market trading as early as 4:00 a.m. ET.
After-hours trading typically occurs sometime between 4:00 p.m. and 8:00 p.m. ET.
Trading 24 hours a day
Other markets, like forex and many futures contracts, trade 24 hours a day, five to six days a week, as a matter of normal operation. Check out our guide to the best forex brokers in the U.S. or our guide on how to trade futures for insight on these markets.
The pros and cons of after-hours trading
Pros
- Traders can enter positions before or after regular trading hours.
- Trades can be made after learning about important news events that can impact prices.
- Positions can be managed without having to wait for markets to open.
Cons
- After-hours trading volatility tends to be high because trading volume is lower.
- Futures prices during extended-hours trading can be unpredictable.
- Each broker has their own set of rules for trades placed outside of normal market hours.
- Orders may not be filled due to a lack of liquidity.
How to get started with after-hours trading
By now, you might be wondering: how do you actually place an after-hours trade?
To participate in after-hours trading, you will, of course, need a standard brokerage account. However, similar to having the ability to trade options, there are a few additional requirements that vary by broker:
- Account Type: You typically need a regular brokerage account to place trades in the pre-market or after-hours market. Some brokers may also allow after-hours trading in retirement accounts like IRAs.
- Approval for Extended Hours Trading: Some brokers require you to specifically opt-in or get approval for after-hours trading. This might involve agreeing to additional terms and conditions that acknowledge the risks associated with trading outside regular market hours.
- Minimum Balance: While most brokers don't require a minimum balance specifically for after-hours trading, you do need to have enough funds to make higher-risk trades while still being able to practice effective risk management.
- Platform Access: You may need to be given access to a special trading platform that supports after-hours trading. These platforms often provide real-time data and advanced trading tools.
- Understanding of Risks: Some brokers may require you to acknowledge that you understand the unique risks of after-hours trading before you can participate. These risks include lower liquidity, wider spreads, and greater price volatility.
Meeting these requirements will allow you to take advantage of after-hours trading opportunities, but it’s important to be aware of the numerous drawbacks relating to the lack of liquidity and additional limitations on the trades opened or closed during these hours.
Looking for more info before starting?
If you are a new investor or looking for some extra information before starting to trade, head on over to our guide for the best stock trading platforms for beginners. If you'd like some practice before delving into the stock market or perhaps simulate trading after-hours, visit our guide to the best platforms for paper trading.
FAQs
How does after-hours trading affect stock prices?
After-hours trading can move markets quickly because of the lower trading volumes. This reduced activity can lead to greater price volatility, where even small trades can cause larger-than-usual price swings. For example, if an important piece of news drops after the market closes, like an earnings report or significant economic event, the price of a stock, sector, or ETF may rise or fall dramatically in after-hours trading as investors react to the news. However, these price movements may not accurately reflect the stock’s value when the regular market reopens.
Most of the time, the pre-market futures for the broad market indices like the Nasdaq and S&P don’t line up with the closing price at the end of the trading day. The pre-market price action can be misleading: sometimes prices move in the opposite direction throughout the day or move much less dramatically. This reflects the increased volatility and reduced liquidity of after-hours trading.
When does after-hours trading end?
The exact time that after-hours trading ends can vary from broker to broker. Most often, the after-market session ends about four hours after the regular market close. For pre-market trading, the session usually begins one to two hours before the market opens and ends several minutes before the market opens.
What is the best broker for after-hours trading?
When it comes to the best brokers for after-hours trading, a few names stand out. Some of these include:
E*TRADE: E*TRADE allows after-hours trading from 4:00 p.m. to 8:00 p.m. ET and is known for its easy-to-use interface, powerful trading tools, and a wide range of educational resources to help investors navigate the market.
Fidelity: Fidelity also offers after-hours trading from 4:00 p.m. to 8:00 p.m. ET and provides a comprehensive platform with low fees, in-depth research, and a reputation for reliable customer support.
Charles Schwab: Schwab provides after-hours trading from 4:00 p.m. to 8:00 p.m. ET. It also offers a user-friendly platform, good customer service, and access to extensive research.
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About the Editorial Team
Brian Nibley is a copywriter and journalist who has been writing about fintech and finance-related topics since 2017. His work has appeared in publications such as MSN Money, Business Insider, Cointelegraph, BitPay, and Finance Magnates.
Steven Hatzakis is the Global Director of Research for ForexBrokers.com. Steven previously served as an Editor for Finance Magnates, where he authored over 1,000 published articles about the online finance industry. Steven is an active fintech and crypto industry researcher and advises blockchain companies at the board level. Over the past 20 years, Steven has held numerous positions within the international forex markets, from writing to consulting to serving as a registered commodity futures representative.
Jeff Anberg is a Staff Editor at StockBrokers.com. Along with years of experience in media distribution at a global newsroom, Jeff has a versatile knowledge base encompassing the technology and financial markets. He is a long-time active investor and engages in research on emerging markets like cryptocurrency. Jeff holds a Bachelor’s Degree in English Literature with a minor in Philosophy from San Francisco State University.